There’s no doubt that the marketing world shares a lot of competitions not just in a specific area but all around the world whether as a restaurant chain, clothing line, technology stores and any other common and/or unique sort of businesses. But some put up a business just to sell it. What do I mean by this?
Every Marketer would want to earn big for their company. But believe it or not, some simply created a company intending to put it up for sale. Just like any other companies, they’d do their utmost best to demonstrate their capabilities by hiring the best people for the job, productive services, brainstorming for business plans and other marketing services as well.
Instead of waiting for a certain company to go bankrupt, which in many cases most people were, a good entrepreneur would want their company to reach the top first then sell it in a price that could hit massive money.
5 Things to Consider in selling a Company for Massive Money
1) The acronym, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortizations).
This simply means that the more earnings that your company gets, the more you can ask for the accurate and relevant Purchase Price. Buyers would want to see the upside when buying a certain company.
‘What benefits could this give me once I buy this company?’ ‘When it was still running in the hands of its CEO or Board-of-Directors, was it earning much or declining already?’
Just like Todd Cushing, a principal at EBIT associate said: “When sales are declining, that’s not when to sell”. If you want to get the maximum money, you must have a steady growth. This is what most of the entrepreneurs are wrong for, selling their businesses when it’s too late. They were waiting for the company to decline and they’d want to get out of business because they’re struggling already.
Always update and improve your company’s outside and inside services. Avoid and replace anything that could make your company at risk. Ask yourself: “What do you have to do to get your sales to increase?”
RISKS
Another cautious thing to consider is the Risk, or the most common type, the Concentration Risks. According to Financial Industry Regulatory Authority or FINRA, this risk means that the “amplified losses may occur from having a large portion of your holdings in a particular investment, asset class or market segment relative to your overall portfolio”.
Let’s say for example at least 30% to 40% of your revenue comes from a single client. What if that single client stops getting products or services from you, then what could happen? If necessary, Cushing added, diversify the customer base or jumpstart sales with increased marketing and promotions.
Concentration risks can depend on the place where your business is operating. If it’s located and earning in a single location, this means that it’s limited by a geographic area. What if that place is closed down by the government or a certain non-government organization group for personal use?
There are different types of concentration risks yet if any of these would happen, then you’re in big trouble! A potential buyer would always think and consider the downside of a company and how much risks one can face when buying your business.
Consider the Types of Revenue
We must accept the fact that not all revenue is created equal. It would be a problem if your business is earning a lot of money in a certain month yet there’d be a time when the revenue scale goes down. This is what we call the windfall revenue. You earn a profit suddenly from a fortunate reason which is out of the norm. Whether you missed something or your companies were affected by unexpected or accidental events and situations, it would still impose a problem as this is just temporary gain.
But if your company comes from recurring revenue, which is a continuous and stable cash flow being received by your company to continue in the future with a relatively high degree of certainty, it’d be more beneficial for the seller as well. It can also be attractive because this tells you how stable your company is.
Sorting out different types of recurring revenue is beneficial to see what could be worth a lot of money. A long-term contract, for example, is normal for many industries to allow their customers in getting long-term obligations in exchange for productive use of their services. The revenue for it is sure and with certainty. Just as long as you keep a legal-binding contract that is signed by the customer.
Your Management Team
It is always good to have a strong team in place. Hire a group of people with exceptional skills or professionals that could manage running your company in different departments which would make it easier for you at first to run the company and for the next owner too.
There were instances that the new company owners would tend to use or hire your teams without hiring a lot of new other people because of the company’s exceptional performance in the market. But if your business highly depends on you, it would mean that you’re the driver. You’re the one who’s running or making it all happen and no one would want to buy it. It’s not a scalable business. However, if the company earns a lot of revenues while you produced a group of other people and even take out yourself in an equation, then it is more appealing for the buyer/s.
Don’t Get Greedy
The idiomatic expression “Leave some money on the table” is applicable in these situations. This means that you could and should not get as much money as you could. Avoid being greedy. This would help the buyer to see the upside of the company and how it is advantageous for them to get your company.
You could take some time before spending the profits on sale. It was suggested by Neil Patel, a famous entrepreneur featured by Forbes Magazine, to ‘create a plan outlining your financial goals, and learn about any tax consequences associated with the sudden wealth’.
Don’t squeeze in every dollar or penny of the company’s savings but you could use it to improve certain things such as the marketing services, killer team of employees, extremely valuable brand, possessing a unique technology or innovation, huge tribe, ideal niche and geographical location, stellar team of managers and profit margins. See! It’s a win-win situation after all.
Selling a business is a complex process that should involve several considerations such as your reason for selling, people that would help you in the process, its biggest strength and weaknesses, contract and documentation and most importantly, your time and energy.
The business sale will also require much of your time and, once the business is sold, you’ll need to determine some smart ways to handle the profit. Consider your company as your tree that you nurtured from it being a seed up until it grew into an oxygen-and fruit-producing living thing. If you moved out of the area for some reason, you would want to give it to somebody who can truly nurture it and probably take it to a whole new level.
